Pfizer has signed an immuno-oncology pact with Merck KGaA, shelling out a whopping $850 million upfront fee.

The agreement, which could also see Pfizer pay milestone payments of $2 billion, centres around MSB0010718C, an early-stage immunotherapy which belongs to the closely-watched anti-PD-L1 inhibitor class. The companies will explore the potential of drug as a single agent as well as in various combinations with both firms’ “broad portfolio of approved and investigational oncology therapies”.

The drug is still in the early stages of development and has treated more than 550 patients but Pfizer and Merck plan to collaborate on “up to 20 high priority immuno-oncology clinical development programmes expected to commence in 2015”. TThe partners are looking at up to six Phase II or III trials.

In September, Merck presented data from an ongoing Phase I study of MSB0010718C demonstrating a complete response and partial responses in patients with non-small cell lung and ovarian cancer. There is also an ongoing Phase II trial evaluating the antibody in patients with metastatic Merkel cell carcinoma, a rare form of skin cancer.

Albert Bourla, Pfizer’s head of vaccines, oncology and consumer healthcare, said that “immuno-oncology is a top priority” for the firm. He added that “this alliance enables us to significantly accelerate the timeframe of our development programmes and move into the first wave of potential immuno-oncology based treatment regimens”.

The deal is a major boost for the German firm and Belén Garijo, chief executive of its Merck Serono aunit, said the alliance will enable the firm “to gain an early entry into the US oncology market”.

Pfizer’s substantial investment also suggests that a renewed bid for AstraZeneca, one of the attractions of which was the PD-L1 checkpoint inhibitor MEDI4736, is less likely”.